Dilemma - Buy to let or Upgrade

raindudu

We are in a real dilemma right now. As stated on title we are so confused about what to do.

As the interest rate is so low, savings do not generate much interest. We are thinking whether to buy another property to let or whether we should upgrade our own house.

We have a three year old daughter and do not plan to have another one. We are currently living in a 3 bed house in an OK area. The school is ok. We are thinking to upgrade our house to a better area with a good school...But the mortgage will be much higher. If we get another property to let out, at least can generate some income after paying the buy-to-let mortgage.

Any thoughts?

fimonkey

Its not going to be that simple a decision - there are many more factors to consider that you've not mentioned here.

Essentially though you are asking whether you should INVEST into property (prices/yields can go up as well as down) rather than SPEND the money on improving your own living standards (and a third option of leaving it in a savings account).

INVEST vs SPEND - have a chat to David Cameron/George Osborne ;-)

Sorry if my answers not THAT helpful - I am trying to say that you are comparing apples with pears - so only you can know the answer based on your personal circumstances and attitude to risk.

raindudu

fimonkey wrote: »

Its not going to be that simple a decision - there are many more factors to consider that you've not mentioned here.

Essentially though you are asking whether you should INVEST into property (prices/yields can go up as well as down) rather than SPEND the money on improving your own living standards (and a third option of leaving it in a savings account).

INVEST vs SPEND - have a chat to David Cameron/George Osborne ;-)

Sorry if my answers not THAT helpful - I am trying to say that you are comparing apples with pears - so only you can know the answer based on your personal circumstances and attitude to risk.

Thank you for your reply... We are just really confused.

I know no one can make this decision for us. Just want to know the different opinions from others.

fimonkey

Start with a 'pro and con' list for each option, publish that here and then see if people add to/comment on it? You will get more 'opinion' if you add details like that.

RE: upgrading but mortgage being higher - the mortgage won't increase significantly (bar interest rate rises), and you can do up a bad property in a good area, but not the other way around. Schools are important!

RE:BTL You would be a landlord which means undertaking certain responsibilities - not jsut a case of sit back and wait for the money to roll in.

I would go for the former given what you've already said.

mjdh1957

If you're confused then the answer to whether you should do it is almost certainly No.

Why go into a business (and letting out property is certainly a business and has some horrific consequences if you get it wrong) if you're not committed to it and actively want to do it?

p00hsticks

raindudu wrote: »

Thank you for your reply... We are just really confused.

I know no one can make this decision for us. Just want to know the different opinions from others.

as finmonkey says - your dillemma is basically whether you want to invest or spend. So just to widen the discussion a bit ....

What has made you plump for buy to let property as your chosen method of investing ? Why not stocks and shares, gold, or any other form of investment ?

How much savings and other investments do you have and how does that compare to the value of your home ? I suspect that you've already got a lot of money tied up in the property market already - do you really want to put even more in ?

raindudu

Thank you all for your kind replies.

More details:

Our family income after tax and NI is around 6,000 per month.
We have 180k mortgage and our house is valued at 340k.
We have 40k savings at the moment.
We have one daughter at 3 and we do not plan to have another one.

Option 1:

Keep the current house and buy another property to let out. Our budget is around 200k for the buy-to-let property. However because we are both on higher income tax, therefore we have to pay tax at 40% of the profit from the rent.

Option 2:

Sell our current house and move to a better area. Our budget will be 500k. The houses for 500k in the area we like will only give us a 3 or 4 bed semi-detached. However the shools are fantastic around that area.

Any more thoughts?
Thank you.